Alliance Bank in talks to tap into virtual banking

PETALING JAYA: Alliance Bank Malaysia Bhd is in talks with potential non-bank partners to tap into opportunities within the virtual banking space, said group CEO Joel Kornreich (pix).

However, he stressed that it does not mean that the group is applying for a virtual bank licence.

“I can’t tell you that yet but we are definitely talking to partners to open up our distribution and we’re looking for ecosystem partnerships,” he told reporters at its AGM today.

He said a virtual bank licence would not provide much benefit or added value to the bank, as it already provides electronic access via mobile and online, and there are no limitations for it to provide these services.

“However if we were to enter into partnership with another non-bank company, it is possible that it might become useful through another vehicle, but that’s not something that is yet on the cards,” he added.

Kornreich said the emergence of virtual banks would definitely increase competition in an already competitive market, and the first areas where competition will intensify are payment services and over time, lending services.

For the financial year ending March 31, 2020 (FY20), the bank is targeting an overall loan growth of 7%, with close to 10% growth for the small medium enterprise (SME) business. Kornreich said the target is lower than FY19’s 10% target due to headwinds in commercial and corporate loans but momentum for SMEs remain strong.

“In terms of overall outlook, we note that the economy is a little bit more challenged right now, we’re seeing a little bit of headwinds but we think we can continue to grow the business and to serve our consumers and SMEs, especially,” he said.

He said the bank is investing RM50 million in digitisation efforts in FY20, in order to improve its services and help customers manage and finance their businesses better.

“While the economy is experiencing some level of slowdown and some companies are experiencing some stress, we keep progressing to serve them better. At the same time of course, we are monitoring our portfolios very vigilantly,” he added.

Kornreich said that provisions for FY20 might be higher as some of its customers are facing difficulties but he believes that most of these companies would be able to weather the challenges.

He said the companies facing pressure are within the construction and retail sectors, and by extension, wholesalers who are supplying the retailers who are under pressure.

On its investment banking business, Kornreich declined to comment on news of it paring down its stake in its wholly owned subsidiary Alliance Investment Bank Bhd but said that the business continues to perform well despite the challenges.

“Investment banking is not an easy business to be in because the stock market is a bit subdued and because opportunities in the capital markets are somewhat limited. But having said that, our investment bank continues to perform reasonably well... if we exclude the exceptional impairments of goodwill last year, it actually had improving results despite pressures in the stock market and brokerage business,” he said.